From the haunted city of Wuhan to California’s Silicon Valley, and from Jerusalem’s Church of the Holy Sepulchre to the Muslim’s shrines of Mecca and Medina, the deadly coronavirus has spread with such relentless hustle that doomsday forecasters have had a field day in spooking the world. Other than killing close to 3,000 people across four continents, the mysterious pathogen has induced stock market bears to go on a gory bloodbath. On Friday, this mayhem further deepened on bourses across the globe — and India bore the brunt of its fury.
After surviving the outbreak with relatively lesser damage for the last few days, Indian markets caught up with global carnage on Friday. Sensex crashed 1,448.37 points to end at 38,297.29 and Nifty plunged 431.55 points to 11,201.7. It was the biggest single day fall for the two indices in the last one decade. During the week, Sensex plunged 2,872.83 points or 6.97 per cent, and the Nifty tumbled 879.10 or 7.27 per cent.
The market offered no hiding place as traditional safe havens like IT sector, too, crumbled like a house of sand. Infosys, TCS and other IT sectors companies fell by the way side on fear that global travel reduction and spectre of a looming recession could hit the IT spending in the US and elsewhere.
Investors lost more than Rs 5 lakh crore on Friday alone as the market capitalisation of BSE-listed companies saw a decline of Rs 12 lakh crore in the last sixth consecutive session of free fall. A massive outflow of by foreign portfolio investors, who have sold equities close to Rs 12,000 crore in one week, has taken away the floor of the market and opened the possibility of a further downside even if there is a technical bounce back in the next week.
As the list of countries hit by the illness grew to 57 with Belarus, Lithuania, New Zealand, Nigeria, Azerbaijan and the Netherlands reporting their first cases, the threats to livelihoods were increasingly eyed as warily as the threats to lives.
A massive sell off of more than 10 per cent on US market, where Down Jones Industrial average fell by 3,000 points over the last five days and warnings by Moody Investor Services of a possible recession have unnerved the investors. The absence of any immediate cure or vaccine to tackle the fast spreading menace has also created an atmosphere of uncertainly and fear.
“The coronavirus has been a body blow to the Chinese economy, which now threatens to take out the entire global economy,” Chief Economist at Moody’s Analytics Mark Zandi has said in a report, adding, “With cases of the new coronavirus disease rising quickly beyond China, the odds of the outbreak turning into a pandemic have now doubled - from 20 per cent to 40 per cent.”
“Our previous assumption that the virus will be contained in China proved optimistic, and the odds of a pandemic are rising,” the report said.
The Moody had earlier forecast a 20 per cent chance of a pandemic, which is defined by the World Health Organization as “the worldwide spread of a new disease.”
Another leading economic forecaster -- Oxford Economics -- has said that the coronavirus outbreak could cost the global economy more than $1 trillion in lost output if it turns into a pandemic.
It warned that the global nature of the outbreak would reduce global growth by 1.3 per cent this year, which is equivalent of $1.1trillion in lost income.
The coronavirus especially threatens to derail aviation, tourism and hotel industry. According to International Air Transport Association (IATA), the aviation sector should brace up for a global revenue loss of $ 30 billion. IATA has also pointed out this would be the first time in a decade that air travel sector could see a degrowth in demand.
Similarly, the coronavirus outbreak could cost the global tourism industry about $80 billion in lost revenue. According to a report by the Economist Intelligence Unit (EIU), Chinese outbound tourism could take more than one year for recovery, and will cause a global loss of about US$80 billion.
The markets are tanking for two possible reasons. First, coronavirus outbreak is far more serious than the mayhem created by its close cousin SAARS which killed 774 people between 2002 and 2003. Secondly, there is no possible vaccine or cure for the Covid-19 in sight.
The coronavirus has caused four times more casualty and ten times more infection in just two months of its outbreaks. The precautionary shutdown of industry, especially in China, South Korea and many other affected countries, have disrupted the supply chain and threatens to derail the economy of several countries. The freefall in the price of Brent crude is seen as a forerunner a economic slowdown the type of which the world may not have seen for ages.
In a closely-knit global economic scenario, India cannot remain immune to the mayhem, but the long-term prospects seem to be bright for the country. It’s expected that hundreds of American companies which operated from China will migrate to India. It could see the emergence of India as a global manufacturing hub.
But the country will have to find ways to protect its tourism, hotel and aviation sector from collapse if the global situation worsens. The passenger and commercial vehicle sectors have also cause to worry. A supply disruption from China might badly hit automotive component and forging industries in India. China accounts for 27 per cent of India’s automotive component imports.
Globally, Moody’s Investor Service foresees auto sales numbers to go down by 2.5 per cent in 2020 as against the previous estimate of a 0.9 per cent slump.
The country’s pharmaceutical and electronic industries also rely heavily on imports of raw materials from China. They have urged the Government to allow airlifting of essential items to help the industries.
India may have remained free of coronavirus outbreak, but the country will hope and pray that globally the situation will improve in the days and weeks to come. “There is no need to press the panic button yet. The outbreak will be a challenge if issues do not get resolved in three weeks,” said Finance Minister Sitharaman.